Dingman Center for Entrepreneurship

Microconsignment and Empathy in Ecuador

This summer, we will feature guest posts from students who received a Dingman Center scholarship to participate in the Maryland Social Entrepreneur Corps (MSEC). They will share their experiences learning about social entrepreneurship while consulting with local businesses in Latin America. Learn more about MSEC here.

Hi! My name is Ted Falk and I’m a rising senior at UMD with a major in marketing and a minor in Spanish. This summer, I’m living in Ecuador as an intern with the Maryland Social Entrepreneur Corps (MSEC). I’ve only been here for a week, but it’s felt like a year’s worth of experiences. Here I am in a small indigenous town we visited yesterday, called Principal:

MSEC is a class and internship program for UMD students to learn about social entrepreneurship and work to combat poverty in developing countries in Latin America. In country, we use a development model called “Microconsignment”, which was created by social entrepreneur Greg Van Kirk. It has much in common with microfinance, a model that has become popular and can be very successful when used correctly. However, there is a seemingly small difference that changes everything. Let me explain.

Under the Microfinance model, banks issue very small loans to aspiring entrepreneurs in developing countries. This allows banks to invest in a large number of individuals, who spend this money on things like land and tools for farming. The entrepreneurs usually don’t have any other source of income, so they put in massive “sweat equity”. The intended result is a number of small businesses coming from a relatively small initial investment. This model can be highly effective and has created a huge impact in countries like Bangladesh, where it started.

The Microconsignment model has many of the same benefits, but I think it has a distinct advantage over its predecessor. In a nutshell, the difference is that in the Microconsignment model, financial institutions lend products instead of money to the entrepreneurs. Once the entrepreneurs sell the products, they pay back the lender, keeping the majority of the profit for themselves. The institutions reinvest this capital in additional products to support more and more entrepreneurs.

The main reason this model is so effective is that it helps mitigate risk for the entrepreneurs. If they cannot sell the products, they simply return them to the creditor with no penalties. This makes them much more willing to try it out, and eliminates the possibility of putting the entrepreneurs in debt. This is very effective in markets with a high level of uncertainty.

Another advantage of this model is that the financial institutions have a greater incentive to help the entrepreneurs sell their products. The creditor doesn’t earn any money unless the entrepreneur succeeds. This puts the lender and the borrower on the same team, working together.

Interns like me start by spending two weeks in-country learning how to work as effectively as possible in the field. Then we are sent in small groups to “satellite work sites” where we help out in various ways. One part of our work is conducting needs and feasibility analysis to identify projects that would be likely to succeed. We also help launch and support these projects, which may include developing marketing materials or generating leads. Finally, we evaluate and improve current projects, as well as expand them to new areas.

In addition to all of this, the program makes a lasting impact through the influence it has on the interns like me. Every day I’m learning important lessons about empathy, international development, and even marketing. Plus, I think all of us interns would agree that this is a truly inspirational experience. Meeting these amazing local people and learning about their way of life can make anyone’s heart a little bigger. I’ll leave you with a picture of two very kind indigenous women preparing a traditional Ecuadorean dish for us:

Edward (Ted) Falk is a Junior at The University of Maryland studying marketing with a minor in Spanish. After graduation, Ted is interested in working for an advertising agency or doing consulting. His interests include music (all types), reading, and traveling. Ted was blessed with the opportunity to study abroad in Barcelona last year, which was his first major culture shock. Through this experience and others, he has come to learn that there is usually no “right” way to do things. Every person and culture has their own unique way of doing things and that’s perfectly fine. In fact, it’s a great opportunity to learn. This summer, Ted is going to Ecuador to learn how they do life there.